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May 30, 2013

Added-Value Programs Leave Advisors Wanting

BlackRock/iShares and American Funds’ programs rated highest by advisors, but smaller firms like MFS, Jackson and Lord Abbett also impress

Financial advisors do value financial firms’ value-added programs—they just want the firms to add more value.

That is one conclusion of a newly completed study examining advisor attitudes on the plethora of programs, tools that broker-dealers, asset managers and insurance companies make available to advisors in hopes of drawing attention to their products.

Value-added is far more than the squishy balls and candies handed out at investment conferences. It encompasses all the things firms do—be it software, market commentary or speakers—to influence advisors outside of the product itself, and firms collectively spend tens of millions of dollars in these efforts, says Howard Schneider (left), author of the 76-page report, in an interview with AdvisorOne.

The president of the consulting firm Practical Perspectives surveyed over 600 advisors earlier this month to find out the impact these various programs are having on advisors, and reached some surprising conclusions.

For example, despite all the attention given to social media, that was the topic area (out of a total of 32) that advisors expressed the least interest in—by far.

“My clients are 55 to 65—am I going to be tweeting to them?” is how Schneider characterizes advisor reaction, adding that a majority of advisors themselves are over 50.

Another finding is that advisors are highly divided on what areas they are most interested in. Broadly speaking, the economy and investments and client development and engagement attracted the most advisor interest, with practice management and retirement issues assuming lesser urgency.

Schneider says he was impressed with the proportion of advisors reporting that value-added programs impacted them: 28% of advisors said they had a significant impact—a high figure, he thought—and fully three-quarters of advisors reported the programs had some impact (modest or significant).

More than two-thirds said the programs influenced their perceptions of the provider firms, with a quarter of advisors saying that influence was significant. Three-quarters of advisors said the programs influenced their willingness to learn about the products of an advisor.

“In that sense, firms that are spending that money are getting payback,” Schneider says. “But when you ask advisors whether they are satisfied, satisfaction levels are quite low.”

They’re using these programs, but say they could be better, he says.

In particular, survey respondents want programs that are usable with their clients.

“They want support that is client-centric, whether it is literature they can use, illustrations they can use, software they can use, seminars; and [they value] the uniqueness of the information—something that they can’t get elsewhere. They don’t want programs with information they already have.”

Schneider adds that advisors expressed a strong preference for value-added programs that are actionable and implementation-oriented rather than theoretical.

“Advisors are very busy. While they want to learn, there’s a lot of things in the day that prevent them from doing that… Give me five concrete steps,” Schneider advises.

Advisors also express a strong preference for in-person, in-office delivery of the value added program.

Now for the drumroll: Blackrock/iShares led the pack of financial firms providing the most useful value-added programs, followed by American Funds and JPMorgan.

Lest one think only the largest firms can compete in this arena, MFS and Jackson were next on the list. Lord Abbett, another smaller firm, also ranked in the top 10. It’s not the firm’s size and reach, but the content of the programs that makes them useful to advisors, Schneider says.

The survey allowed advisors to fill in which programs they specifically valued for each firm; answers varied greatly, with advisors expressing appreciation for Blackrock’s retirement center and Social Security program and American Funds’ client materials and lunch meetings. Oppenheimer’s blogs, Invesco’s white papers and Transamerica’s coaching forum rated mentions as well.

As a marketing consultant, Schneider naturally took a more granular look across advisor channels, and found different tendencies evident among wirehouse advisors, independent broker-dealer affiliates and RIAs.

Asked what a profile of an effective value-added program would look like, Schneider responded:

“It would be delivered in person, would have a client-facing component; it would help advisors in some way grow their practice or gather new assets; there would be specific implementation steps for advisors; it would be some sort of unique information or perspective that is not given elsewhere; it would recognize this is not a homogeneous market.”

But financial firms have been slow to recognize advisor preferences in value-added programs.

“There’s a lot of me-too,” Schneider says. “Somebody develops a Social Security program, then other firms say ‘We need a program or tool around that;’ somebody builds a retirement income planning module, then the others check off that box, too.

“You need to make your program differentiated,” he says. “You’re just wasting your money if you’re just trying to follow what others have done.”

The Practical Perspectives consultant says the report, titled “Value Add Support to Financial Advisors—Insights and Opportunities 2013” and replete with 66 exhibits, is available for purchase.

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